The Way Out: How Budget Crisis Can be Resolved

Oct 9, 2013 11:41am

In what appeared to be a tiny opening on Tuesday, President Obama said he would be open to a short-term increase in the debt ceiling — and to engage in broader budget negotiations during that short-term period.

It wasn’t much of a breakthrough. The White House quickly said the president would still refuse negotiations on the debt ceiling and Republicans said they would not agree to even temporary measures without getting something in return.

So, we are back where we were:  The White House saying no talks until the debt ceiling is raised and the government re-opened and Republicans demanding concessions before acting on either.

But if there is a way out, it will likely begin with a short-term (two or three weeks) measure to raise the debt ceiling and re-open the government followed by intensive talks on a broader budget agreement for the rest of the year.  The White House will insist they are not negotiating on the debt ceiling, but it would be part of a final deal.

What could that deal look like?

The Republican leadership is quietly floating this possibility: a one-year budget that eliminates most of the spending cuts under the sequester (as the White House wants) in exchange for modest entitlement changes (as House Speaker John Boehner wants).  We are talking modest changes: Most likely a slight increase in Medicare premiums for wealthy retirees and combining Medicare Part A and B (both reforms the president offered Republicans last year in exchange for tax increases).  Republicans will also want something on Obamacare and are now floating the idea of reducing the penalty (now $95) for those who fail to get health insurance — a far cry from the initial demand to defund the law.

There are many obstacles to a deal like this. Democrats would hate making any concessions when they believe they have the upper hand and the Tea Partiers would oppose this because it raises spending and does nothing significant on health care or entitlements.

But it is not implausible.  It would do away with the hated sequester and give both sides a chance to claim they got something.

 

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